K. Treppides & Co Ltd: Cryptocurrency: The requirement of a firm to service the local market trading in cryptocurrency by Alexis Dalitis


 b alexis dalitis cropped

By Alexis Dalitis
Director, Member of the Board of Directors
K. Treppides & Co Ltd

Reading the press release of the European Union on 9th March 2022 for the extension of the sanctions on Russia and Belarus, responding to Russia's acts of aggression on Ukraine's territorial integrity, we can identify an important point, clarifying that crypto assets fall in the definition of the “transferable securities” thus it is clearly mentioned that the sanctions must be implemented for crypto asset related transactions as well. The need of the European Union to make an explicit reference in its press release for this matter, indicates the importance and vital role that crypto assets have in the worldwide economy.

The regulators worldwide have identified the important role the crypto assets, including those that do not fall under the transferable securities, have in the world during the last few years and seeing the trend to be further increased, they had no other choice than adopting with the new reality and devote resources to control and regulate the said market in order to manage the wide range of financial and social risks emanating by leaving unattended the crypto assets market. 

The Cyprus Securities and Exchange Commission (the “CySEC”), in an effort to locally regulate the provision of crypto assets services that do not qualify as financial instruments under the Investment Services and Activities and Regulated Markets Law, and do not qualify as Electronic Money under the Electronic Money Law has published the regulatory framework and the explanatory Policy Statement on the Registration and Operations of Crypto Asset Service Providers (the ''Policy Statement'') through which it provides guidance to the market participants and especially to the Crypto Asset Service Providers (the ''CASPs'') as to their obligations in case they will provide services from Cyprus or they provide service in Cyprus (i.e. to Cypriot residents).

Considering the above, if  a CASP wishes to provide services to Cyprus residents it will need to ensure that it will fully abide to the obligations stemming from the AML/CFT Law, the ''CASP Registration Directive'' and the CySEC Directive for the Prevention and Suppression of Money Laundering and Terrorist Financing (collectively hereinafter the ''Cumulative CASP Rules'') and to ensure that it falls into one of the below categories which are eligible to provide services to Cyprus residents.

  1. It has submitted a full CASP application to CySEC and CySEC has considered and registered the said CASP, allowing to operate from Cyprus in order to be able to provide services and/or perform activities in relation to crypto-assets under the Cumulative CASP rules. For the avoidance of doubt, where a CASP is established in another EEA Member State or in a Third Country, but provide services from Cyprus under any form and/or arrangement, will be operating from Cyprus in relation to the service and/or activities originating therefrom and will be subject to registration and supervision under the Cumulative CASP Rules.
  1. It is registered as CASP in another EEA member state, and it has submitted to CySEC a notification form providing sufficient evidence in relation to its CASP registration with the other EEA National Competent Authority for the relevant services and/or activities in order to be exempted from the obligation to be registered with CySEC when providing services and/or undertaking activities in relation to crypto-assets in Cyprus. The said procedure must be followed before the CASP commence its operations in Cyprus. CySEC will list the EEA CASPs that operate in Cyprus, under the exemption provided on its website, providing relevant information per EEA CASP (the “EEA CASPs List”).
  1. CASPs registered or licensed in a third country are not eligible for the exemption as explained for the EEA CASPs in point 2 above. Therefore, the CASPs that are registered or licensed in a third country must satisfy the cumulative CASP Rules in order to be registered with CySEC to be able to provide services and/or perform activities, in relation to crypto assets in Cyprus. CySEC notes that although it will examine case by case all applications, its ability to efficiently supervise and/or enforce the Cumulative CASP Rules for the operations of a third country CASP is more likely to be met where the services and/or activities in question are undertaken on a limited scale, e.g. services provided to institutional counterparties such as Cyprus based CASPs who are registered with CySEC and who are subject to supervision, rather than services in relation to consumers. Third country CASPs registered with CySEC, will be listed in a bespoke section on CySEC’s website.

For the requirements and procedure to be followed in order to be prepared and apply for registration with CySEC for any of the above categories, a case by case analysis must be performed depending on the actual business needs thus to conclude for the optimal solution for any CASP which is considering to provide services from or within Cyprus. 

Finally, it is very important that all the Cyprus citizens that are actively trading in crypto assets, they ensure that their crypto asset provider falls in one of the above mentioned categories in order to have the highest possible protection and service quality in this relatively new and volatile market.

K. Treppides & Co Ltd is the largest independent consulting company in Cyprus with an established international presence and offices in Great Britain and Malta. Today the company employs approximately 200 professionals. It offers a full range of consulting, tax, accounting services to groups, companies and investors operating internationally in a variety of financial and business sectors. The Company, which started its operations in 1985, has 36 years of expertise and an elite team of experienced executives who can guide and assist investors and businesses during the establishment process and subsequent investment activity in Cyprus and internationally.

Contact Details:
Alexis Dalitis
alexis.d@treppides.com
www.treppides.com

Nicosia: Treppides Tower, Kafkasou 9, Aglantzia, CY 2112, Nicosia, Cyprus
Limassol: Andrea Kariolou 38, Ayios Athanasios, CY 4102, Limassol Cyprus
London:7 Milner Street, London SW3 2QA
Malta: Level 1, Somnium, Tower Road, Swatar, Birkirkara BKR 4012

08 April 2022
Copyright © 2022 K.Treppides & Co Ltd
Handcrafted Design and Development by Bevisible